RBS tells clients to prepare for ‘monster’ money-printing by the Federal Reserve

RBS tells clients to prepare for ‘monster’ money-printing by the Federal Reserve

As recovery starts to stall in the US and Europe with echoes of mid-1931, bond experts are once again dusting off a speech by Ben Bernanke given eight years ago as a freshman governor at the Federal Reserve.

By Ambrose Evans-Pritchard, International Business Editor


Entitled “Deflation: Making Sure It Doesn’t Happen Here“, it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.

The speech is best known for its irreverent one-liner: “The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost.”

Bernanke began putting the script into action after the credit system seized up in 2008, purchasing $1.75 trillion of Treasuries, mortgage securities, and agency bonds to shore up the US credit system. He stopped far short of the $5 trillion balance sheet quietly pencilled in by the Fed Board as the upper limit for quantitative easing (QE).

Investors basking in Wall Street’s V-shaped rally had assumed that this bizarre episode was over. So did the Fed, which has been shutting liquidity spigots one by one. But the latest batch of data is disturbing.

The ECRI leading indicator produced by the Economic Cycle Research Institute plummeted yet again last week to -6.9, pointing to contraction in the US by the end of the year. It is dropping faster that at any time in the post-War era.

The latest data from the CPB Netherlands Bureau shows that world trade slid 1.7pc in May, with the biggest fall in Asia. The Baltic Dry Index measuring freight rates on bulk goods has dropped 40pc in a month. This is a volatile index that can be distorted by the supply of new ships, but those who watch it as an early warning signal for China and commodities are nervous.

Andrew Roberts, credit chief at RBS, is advising clients to read the Bernanke text very closely because the Fed is soon going to have to the pull the lever on “monster” quantitative easing (QE)”.

“We cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable,” he said in a note to investors.

Roberts said the Fed will shift tack, resorting to the 1940s strategy of capping bond yields around 2pc by force majeure said this is the option “which I personally prefer”.

A recent paper by the San Francisco Fed argues that interest rates should now be minus 5pc under the bank’s “rule of thumb” measure of capacity use and unemployment. The rate is currently minus 2pc when QE is factored in. You could conclude, very crudely, that the Fed must therefore buy another $2 trillion of bonds, and even more if Europe’s EMU debacle goes from bad to worse. I suspect that this hints at the Bernanke view, but it is anathema to hardliners at the Kansas, Richmond, Philadephia, and Dallas Feds.

Societe Generale’s uber-bear Albert Edwards said the Fed and other central banks will be forced to print more money whatever they now say, given the “stinking fiscal mess” across the developed world. “The response to the coming deflationary maelstrom will be additional money printing that will make the recent QE seem insignificant,” he said.

Despite the apparent rift with Europe, the US is arguably tightening fiscal policy just as hard. Congress has cut off benefits for those unemployed beyond six months, leaving 1.3m without support. California has to slash $19bn in spending this year, as much as Greece, Portugal, Ireland, Hungary, and Romania combined. The states together must cut $112bn to comply with state laws.

The Congressional Budget Office said federal stimulus from the Obama package peaked in the first quarter. The effect will turn sharply negative by next year as tax rises automatically kick in, a net swing of 4pc of GDP. This is happening as the US housing market tips into a double-dip. New homes sales crashed 33pc to a record low of 300,000 in May after subsidies expired.

It is sobering that zero rates, QE a l’outrance, and an $800bn fiscal blitz should should have delivered so little. Just as it is sobering that Club Med bond purchases by the European Central Bank and the creation of the EU’s €750bn rescue “shield” have failed to stabilize Europe’s debt markets. Greek default contracts reached an all-time high of 1,125 on Friday even though the €110bn EU-IMF rescue is up and running. Are investors questioning EU solvency itself, or making a judgment on German willingness to back pledges with real money?

Clearly we are nearing the end of the “Phoney War”, that phase of the global crisis when it seemed as if governments could conjure away the Great Debt. The trauma has merely been displaced from banks, auto makers, and homeowners onto the taxpayer, lifting public debt in the OECD bloc from 70pc of GDP to 100pc by next year. As the Bank for International Settlements warns, sovereign debt crises are nearing “boiling point” in half the world economy.

Fiscal largesse had its place last year. It arrested the downward spiral at a crucial moment, but that moment has passed. There is a time to love and a time to hate, a time for war and a time for peace. The Krugman doctrine of perma-deficits is ruinous – and has in fact ruined Japan. The only plausible escape route for the West is a decade of fiscal austerity offset by helicopter drops of printed money, for as long as it takes.

Some say that the Fed’s QE policies have failed. I profoundly disagree. The US property market – and therefore the banks – would have imploded if the Fed had not pulled down mortgage rates so aggressively, but you can never prove a counter-factual.

The case for fresh QE is not to inflate away the debt or default on Chinese creditors by stealth devaluation. It is to prevent deflation.

Bernanke warned in that speech eight years ago that “sustained deflation can be highly destructive to a modern economy” because it leads to slow death from a rising real burden of debt.

At the time, the broad money supply war growing at 6pc and the Dallas Fed’s `trimmed mean’ index of core inflation was 2.2pc.

We are much nearer the tipping today. The M3 money supply has contracted by 5.5pc over the last year, and the pace is accelerating: the ‘trimmed mean’ index is now 0.6pc on a six-month basis, the lowest ever. America is one twist shy of a debt-deflation trap.

There is no doubt that the Fed has the tools to stop this. “Sufficient injections of money will ultimately always reverse a deflation,” said Bernanke. The question is whether he can muster support for such action in the face of massive popular disgust, a Republican Fronde in Congress, and resistance from the liquidationsists at the Kansas, Philadelphia, and Richmond Feds. If he cannot, we are in grave trouble.

Obama warns Azerbaijan against using force

Obama warns Azerbaijan against using force

U.S. President Barack Obama promised in a letter released on Monday to tackle “serious issues” in straining relations with Azerbaijan.”

U.S. Defense Secretary Robert Gates handed Obama’s letter to Azerbaijani President Ilham Aliyev during a visit meant to ease tensions with the oil-rich Caspian Sea country, Reuters reports.

A U.S.-backed push for a historic rapprochement between Armenia and Turkey has damaged ties between Washington and Azerbaijan, which worries its interests will be damaged by the reconciliation efforts.

Baku in April accused the United States of siding with Armenia over Nagorno-Karabakh and threatened to “reconsider” its relationship with Washington.

“I am aware of the fact that there are serious issues in our relationship, but I am confident that we can address them,” Obama wrote in the letter delivered on Sunday by Gates.

Obama praised Azerbaijan’s commitment to efforts to resolve the Nagorno-Karabakh conflict, mediated by the United States, Russia and France, and warned against using force. “I believe that a peaceful resolution to the Nagorno-Karabakh conflict is essential for the long-term stability of the South Caucasus region, and support for this outcome will remain a priority for the United States.”

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Atmosphere in the region unfavorable for Clinton’s visit

Richard Giragosian: Atmosphere in the region unfavorable for Clinton’s visit

Lena Badeyan
“Radiolur”

The atmosphere in the region is not favorable for US State Secretary Hillary Clinton’s visit, Director of the Armenian Center for National and International Studies Richard Giragosian told reporters today. The reason of this unfavorable atmosphere is Azerbaijan’s policy, which resulted in the adoption of the Obama-Medvedev-Sarkozy statement.

According to Richard Giragosian, the statement was an attempt by the international community to bring Azerbaijan back to negotiations.

Richard Giragosyan thinks the OSCE Minsk Group will not succeed unless Karabakh becomes a negotiating party.

Referring to Azerbaijani provocation of June 18 in the line of contact, the expert said such incidents could become more frequent during the summer, though, he said he didn’t think Azerbaijan could officially declare war to Armenia. At the same time Richard Giragosyan stressed that an unexpected, sudden war might be possible and Armenia should be ready for any developments.

“Armenia is getting ready for the 21st century war, while Azerbaijan is preparing for the wars of the past, the wars typical to Napoleon era,” he added.

Armenia should show Azerbaijan that any attack will first of all cause damages to itself.

! Reproduction on full or in part is prohibited without reference to Public Radio of Armenia

Terms of Engagement–Secretary Clinton’s Visit to Azerbaijan

Terms of Engagement: Secretary Clinton’s Visit to Azerbaijan

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By Elmar Chakhtakhtinski

The news about the upcoming visit by Secretary Clinton to Azerbaijan, following the Defense Secretary Robert Gates’ trip to Baku on June 15, have already been interpreted as a change in Obama administration’s attitude towards that country’s authoritarian regime. If Azerbaijan was a democracy or at least the government there took some visible steps in that direction, a re-engagement with this strategically important nation could be a move in the right direction. But under the present conditions such visit might have undesirable consequences for the future of democracy in Azerbaijan and for the US interests in the region.

When President Obama named Azerbaijan along with Zimbabwe among the world’s worst violators of press freedom last April, the US-Azerbaijani relations seemed to plunge into a downward spiral. The United States has not had an ambassador in Azerbaijan since July 2009. The Azerbaijani president Ilham Aliyev was also conspicuously absent from the list of world leaders invited to Obama’s high-profile nuclear summit in DC this April, although the presidents of Armenia and Georgia, both of Azerbaijan’s neighbors in South Caucasus, attended the event.

Apart from diplomatic troubles, in March this year the Washington Post published a report about the corruption within the Azerbaijani leadership, including a reference to a $45 million luxury mansion in Dubai apparently belonging to the President Aliyev’s 11-years old son. It was followed by an Azeri opposition leader’s article in the same newspaper.

These developments led to speculations in Baku about the Aliyev regime’s falling out of favor with Washington. They also fuelled the hopes of Azerbaijani opposition that under President Obama the US might show a more principled stance in support of democracy than the previous US administration.

In its turn, the government in Baku accused Washington in supporting Armenia in its conflict with Azerbaijan over Nagorno Karabakh, cancelled the scheduled joint military exercises with the US, and directed the state-controlled media to ratchet up anti-American rhetoric to unprecedented levels. The Azerbaijani officials issued statements about further “adequate retaliation”, including threats to evict Western oil companies and pull out of the Nabucco project, deemed important as an alternative to Europe’s dependence on Russian natural gas.

Azerbaijan’s Deputy Foreign Minister Araz Azimov also hinted on ending Baku’s cooperation with the coalition efforts in Afghanistan, for which Azerbaijan presents a vital transit route. During his speech at Columbia University in New York in November 2009, he even went as far as predicting the failure of the US troop surge, thus stepping right into the heat of America’s internal policy debate on Afghan policy.

Meanwhile, the regime in Baku gradually accelerated its attacks on the opposition and independent media.

Under such circumstances, the expected visit by a US Secretary of State can easily be perceived by the officials in Azerbaijan as a sign of the United States finally succumbing to their pressure and agreeing to turn a blind eye to the continuing suppression of dissent in Azerbaijan. Still, some added ingredients may help to make the best out of Secretary Clinton’s planned trip and maintain a degree of consistency in the US foreign policy towards that country.

For starters, she can meet with the leaders of major opposition parties and the representatives of remaining free press and truly independent NGOs, in addition to government officials. This would serve as an indication that America’s intentions are not limited to the temporal benefits from befriending the ruling regime, but rather include a long-term alliance with the Azerbaijani people and support in their aspirations to join the community of free nations.

Mrs. Clinton can recall the two pro-democracy bloggers, Adnan Hajizada and Emin Milli, imprisoned under bogus “hooliganism” charges, whose case has drawn numerous official protests from the US and European governments. She might also draw attention to the fate of journalist Eynulla Fatullayev, whom the Azerbaijani authorities are keeping behind bars in a blatant violation of a verdict by the European Court of Human Rights, which is mandatory for Azerbaijan as a member of Council of Europe.

Ideally, the US would insist on the release of these dissidents before Secretary Clinton departs for Baku. As a minimum, these issues should be raised openly and publicly before the Azerbaijani leadership during the trip.

Short of a strong emphasis on human rights and democracy, Secretary Clinton’s visit will only embolden the authorities in Azerbaijan to adopt even more brutal tactics against the opponents of the regime.

The inconsistency of a sudden “warm-up” in Washington’s approach towards the Azerbaijani dictatorship might also signal a weakness of US positions in the greater area around that country, which includes Russia, Iran and Afghanistan. Coming in the midst of the Iranian nuclear dilemma, this apparent pullback from the proclaimed support for democracy in Azerbaijan would not only damage the US reputation in the region, but also reinforce the already entrenched belief in America’s susceptibility to energy and security blackmail.

About the author: Elmar Chakhtakhtinski is the chairman of Azerbaijani-Americans for Democracy (AZAD), a US organization that advocates support for democracy in Azerbaijan and other countries.

Building a “Strategic Road” To Batken–First Action By New Govt.

[One of the government's first actions was to begin construction of this strategic road to Batken.  If this is because of the proposed American Special Forces training center then it will confirm the new govt. intention to appease the US.   SEE: US Assists Kyrgyzstan in Constructing Anti-Terrorist Center in Batken]

In Kyrgyzstan begins construction of a strategically important route linking the Batken region of Osh

Mamadzhan Berdishev:

29/06 13:42, Bishkek – IA “24.kg”, Tolgonai OSMONGAZIEVA

“In Kyrgyzstan, begins construction of a strategically important route Batken – Pulgon”, – said IA “24.kgspokesman for Acting Governor of Batken region of the CD Mamadzhan Berdishev.

According to him, in order to get in the Osh region, residents of Batken have to go through the enclave Soh, which creates a lot of inconvenience.

“The road is designed by the European Bank for Reconstruction and Development, which provided for its implementation was $ 35 million in grants. Tender shall act Chinese construction company. She currently conducts engineering and topographic surveys, building a base and deliver the necessary equipment, – says Mamadzhan Berdishev. – From September 1, will begin construction of a road stretching about 60 kilometers. It will take 2 years. But this will create additional jobs for local residents. “

Peace On the Eve of the War–Azerbaijan To Be Starting Point

Peace on the eve of the war. Azerbaijan has turned into the main “site jumping” to the U.S. and Israel in the preparation of an attack on Iran

P. Ivanchenko:

World on the eve of war

Azerbaijan has turned into the main “site jumping” to the U.S. and Israel in the preparation of an attack on Iran

Preparation of U.S. and Israeli aggression against Iran is in the final stage. According to Western media, Tehran declared martial law on its north-western borders. Personnel and equipment of the Islamic Revolution Guards Corps (IRGC) in large numbers being transferred to the area of the Azerbaijani border and the Caspian Sea.

This is understandable – at the airfields in Azerbaijan in full readiness for a strike on Iran’s facilities are concentrated shock of Israel and the U.S..

According to some reports, over the past few days Israel has successfully transferred the large number of bombers to bases in Azerbaijan, via Georgia. The Americans used the same way.

Commander of the IRGC, General Mehdi Moeini said: “The mobilization is associated with the presence of American and Israeli forces on the western border. In addition, according to Moin, some Western countries are trying to ignite ethnic conflict in the Iranian province of West Azerbaijan, and destabilize the region.

Indeed, Western and Israeli intelligence have long been heated separatist and nationalist sentiment in the province, creating terrorist groups and anti-government underground from the chauvinist-minded ethnic Azeris. Therefore, it is possible that foreign intelligence services are preparing a rebellion, which will be used as another excuse to attack Iran (under the pretext of protecting national minorities).

Recall that the Iranian (Iranian terminology – West) Azerbaijan, where relocating the guards, bordered by Turkey, Iraq and Armenia. Media reported that a long convoy of tanks, artillery, air defense and infantry stretches along the main highway in the direction of Azerbaijan and further to the north to the Caspian Sea.

Meanwhile, June 18-22, the US-Israeli-German squadron, which arrived in the Persian Gulf from the Mediterranean Sea, continues to air and sea maneuvers. Are processed attacks on Iranian targets, intercepting missiles fired by Iran, Syria and Hezbollah on American and Israeli targets in the Middle East. In the squadron, headed by the aircraft carrier USS Harry S. Truman “in addition to the Israeli ship is German frigate Hessen-F221. The exercises in the Mediterranean Sea took place from June 6 to June 10, from the aircraft carrier were carried out day and night flights of strike aircraft that bombed targets on the range and Nabatiyeh in southern Israel.American planes took off from bases in Germany and Romania, refueled at Air Force bases and Israel in cooperation with the Israeli air strikes on the remote worked out goals for the Red and Mediterranean Seas. The pilots also trained to conduct air combat.

In addition, in early August this year, Washington intends to focus on the coast of Iran and within the operational range of him, at least 4 or 5 aircraft carriers. A June 22 closest adviser of Israeli Prime Minister Benjamin Netanyahu said that taken during the last meeting of the UN Security Council sanctions against Iran “not adequate” threat and can not stop Iran’s nuclear program. “Pre-emptive military strike is obviously necessary,” – he said.

Analysts say that a particular intensity of military preparations purchased shortly after the resolution, the Group of Eight. Leaders of eight major industrialized countries (group G8) have condemned North Korea for sinking a South Korean ship, and demanded that the Iranian human rights. This was discussed in the final communique of the group after the summit in Canada Toronto.

This “coincidence” suggests that the G8 decision gave carte blanche to potential aggressors. In this regard, particularly interesting role of Russian representatives in the formation of the communique. According to Japanese participants, the only country that resisted tightening of the official statements of the group, was Russia. But, as reported by AP, a representative of the Russian delegation, on condition of anonymity said that Russia did not consider the commission’s decision as final G8 and considers that the additional allegations against North Korea will only lead to negative consequences. From this it follows that the objection Russia caused only “Korean” part of the communiqué, and on “the Iranian issue” reigned consent.

Meanwhile, anti-war stance of Russia in this case has long been a serious obstacle to the aggressive US-Israeli plans. Recently, however, Russia views the “Iranian problem” began to change rapidly, and the G8 meeting to come to full agreement with the West, thereby eliminating the last obstacle on the path to war. Obviously, this evolution had its own reasons – typically, some underhand agreement. In any case, it has already been named in the media reincarnated Covenant “Molotov – Ribbentrop. However, this comparison is hardly correct. Although, if only because the same pact, no doubt, the public interest of the USSR. If only because that pushed for a time, our encounter with Nazi Germany. You can not say about the current situation.

After the aggression the U.S. and Israel against Iran will not bring our country is nothing but new troubles. If the attack is successful, then under the control of the U.S. and Iran will deposit energy, which seriously complicate the situation of our country on the international oil market. In addition to this we get another “black hole” of terror and instability in dangerous proximity to our borders. There is one more important detail – an attack on Iran will put in an extremely unfavorable situation of Armenia – the last Russian ally in the Caucasus. In this regard, it should be noted one more “coincidence” intensify anti-Iranian actions and aggravation on the Karabakh front – no doubt sanctioned by the American-Israeli leaders.

Clearly, a new war in Karabakh, which is whatever the outcome will lead to total exclusion of Russia from the South Caucasus region, could become a logical continuation of the anti-Iran policy of the USA and at the same time – a preparatory stage for large-scale armed conflict in the Middle East. And finally, the sooner our “strategic partners” to the right with the “Iranian problem”, the faster will take on the “final decision of the Russian question.”

What was our guide for the review of position on Iran? Some analysts believe that this series of personal guarantees to support the conduct of a domestic policy. But be that as it may, it must be remembered that all the recent years Americans have consistently “throw” of their partners, and their promises turn into broken pottery, as chervontsi Basavryuk a famous story by Gogol.

If we compare the current situation with the period before World War II, then Russia, following the logic of its foreign policy aspirations and decisions, rather like France during the “Munich Agreement”.

Peter Ivanchenko
28/06/2010

Source – Segodnya.Ru

Georgia bemoans a dangerous embargo

[The Saakashvili government is in great danger of an American-sponsored overthrow, partly to gain Putin's trust.  This silent embargo of military equipment to Georgia, coupled with the recent flurry of visits to the US Congress made by Georgian opposition party leaders, is sure sign that the US equation for power-sharing within Georgia is changing.  SEE: Georgian Democrats leader to discuss security issues in United States ; Georgian opposition fanned "Irangeyt"]

Georgia bemoans a dangerous embargo

Georgia claims it is being prevented from buying the equipment it needs to defend itself. Reuben F Johnson reports from the recent Eurosatory exhibition
By Reuben F Johnson

Georgian emotions were running high at the Eurosatory defence exhibition in Paris in mid-June as officials expressed their frustration at being unable to purchase defence equipment.

At the same event representatives of US and Israeli companies stated that sales of defence equipment to Georgia remain obstructed by both US government policy and pressure from the Russian government.

The barriers to these sales originate from the brief war between Georgian and Russian armed forces in August 2008 and the subsequent settlement negotiated by the French president, Nicolas Sarkozy. The ceasefire agreement resulted in a sizeable number of Russian troops remaining in the separatist provinces of Abkhazia and South Ossetia.

During a visit to the Georgian capital of Tbilisi prior to Eurosatory Jane’s was briefed by representatives of the Georgian Ministry of Internal Affairs’ (MIA’s) intelligence directorate, Ministry of Defence and Foreign Intelligence Service (FIS) on the precarious situation facing the country.

Georgia’s concerns focus on the composition of the Russian units in the two provinces, which it claims are capable of far more than just protecting the borders of the separatist enclaves.

“These Russian formations include several hundred [Uralvagonzavod] T-90S main battle tanks, which you only need if you are preparing for an invasion. This is not just a strictly defensive posture,” said an MIA officer who gave a tour of the line of control where Georgian troops face off against Russian forces within 100 m of their position.

“Also, a significant portion of these Russian troops are not regular army but armed formations of the Federal Security Service [the FSB: the current-day equivalent of the former Soviet KGB],” he continued.

Georgia’s hardware requirements are focused around three main types of systems, according to Deputy Defence Minister Nodar Kharshiladze. “[Firstly] we need some over-the-horizon radars that can give us advance warning of any Russian movement across the border because we would have very little early warning given the distance between South Ossetia and [the Georgian city of] Gori,” he told Jane’s.

“Secondly, since Georgia would be fighting a defensive war to buy time for a ceasefire to be negotiated again, our ground units need the best possible man-portable anti-tank weapons in order to delay the advance of any Russian armoured offensive. Thirdly we need more current-day tactical radios in case of any breakdown in the land-line communications network.”

The latter issue may represent the most significant threat to Georgian security. The country’s main rail line runs from Poti, on the east coast, to Gori, just south of South Ossetia, and on further west to Tbilisi. “If a Russian offensive were to break out of South Ossetia and push through to Gori,” explained a defence contractor based in Tbilisi and working with the Georgian military, “they could not only cut the country in half and shut down all heavy rail transport but they would also cut the main fibre- optic line that runs parallel to the rail network and disable all communications. This makes the ability of the Georgians to have a back-up radio network that is not dependent upon a fibre-optic network all the more crucial.”

However, none of these systems have been made available for the Georgians to purchase, according to US and NATO personnel based in Tbilisi. This was confirmed by US and Israeli company representatives at Eurosatory.
A Georgian national at the defence exhibition who works for a major US provider of communications equipment told Jane’s : “I have worked with this company for years and I know all of their products, all of the technology.

And yet, when we opened a new European office, I was not even permitted to attend its opening or see what was inside – all because of the current US administration’s policy against allowing any further sales to my country.

“No one can understand what the US government’s goal is in blocking these sales. Radios and radars are not offensive weapons,” said the Tbilisi-based defence contractor, whose company is involved in training the Georgian military to NATO standards. “The Georgians also lost some of their air-defence radars during the conflict with Russia and now they cannot replace them – nor can they replenish any of the SAMs [surface-to-air missiles] that they fired at Russian air forces.”

Other Georgian officials expressed their frustration with the situation by pointing out that “the US even prohibits the sale to us of blank ammunition to be used for training. Obviously pushing the ‘reset’ button with Russia is more important than our military.”

The reservations of Israeli defence companies about trade with Georgia derive not from fear of an unofficial blockade by Washington but from Tel Aviv’s concerns about its relations with Russia. “Russia is not an unimportant nation for us in a number of respects,” said one Israeli industry representative at Eurosatory.

Both Israeli and Georgian defence analysts claim that an ‘under the table’ veto exists that Moscow can exercise on any arms sales to Georgia and that, in the words of a Georgian analyst, “this is not the first case of this sort as Russia constantly exerts pressure on the countries that sell weapons to the states whose relations with Moscow are not good. Russia has also succeeded in thwarting [any] negotiations with Bulgaria and other former countries of the Warsaw Pact”.

In the meantime, according to Georgia’s FIS chief, Gela Bezhuashvili: “Eighty per cent of our activity outside Georgia is consumed with dealing with the Russian threat to our country.” Counter-intelligence officials with the MIA also revealed that “at least two persons of some level of importance in the [Georgian] government are arrested here every month because they have been ‘bought’ by the Russians to work against their own country”.

Reuben F Johnson is a JDW Correspondent, based in Paris
© IHS Global Limited

Kyrgyzstan’s referendum discomforts Kremlin

MOSCOW – Agence France-Presse
A Kyrgyz soldier guards the entrance of a polling station outside Bishkek, Kyrgyzstan on Sunday. AP photo
A Kyrgyz soldier guards the entrance of a polling station outside Bishkek, Kyrgyzstan on Sunday. AP photo

Kyrgyzstan’s vote to create the first parliamentary republic in Central Asia has discomforted Moscow, which shows little interest in Western-style democracy at home or in its ex-satellites.

As Kyrgyzstan on Sunday voted in favor of a new constitution, Russian President Dmitry Medvedev expressed bewilderment at how a country wracked by bloodletting and instability would transform itself into a democracy.

“I have a hard time imagining that a parliamentary republic could work in Kyrgyzstan,” he told reporters at the G20 summit.

“Will this not turn into a succession of endless problems, reshuffles in parliament, the rise to power of these or those political forces, an uncontrolled transfer of authority from one hand to another, and, finally, will this not facilitate the arrival to power of the forces with extremist views?”

His remarks stood in stark contrast to the robust backing Kyrgyzstan’s interim government received from Russia immediately after a popular uprising toppled president Kurmanbek Bakiyev in April.

The Kremlin was the first foreign state to reach out to the ex-Soviet nation, promising humanitarian aid at a time when the West was just scrambling to formulate a coherent response.

But after this month’s bloody inter-ethnic clashes, Moscow — mindful of its disastrous venture into Afghanistan in Soviet times and the five-day war with Georgia in 2008 — acted with the utmost caution and refused to send troops to Kyrgyzstan.

Medvedev’s skepticism infuriated the new leadership in Kyrgyzstan.

“Probably they are misinformed, blindly believe special service agents, which have long been lackeys for the local oligarchs,” said Omurbek Tekebayev, who plans to run for the parliament speaker’s position.

Ex-Soviet Central Asia has little history of democratic traditions and Kyrgyzstan has long been seen an island of democracy in a region known for its strongmen leaders.

In Kazakhstan, President Nursultan Nazarbayev is accused by critics of seeking to be head of state for life.

In Tajikistan, critics regularly accuse its leader Emomali Rakhmon of silencing the opposition. In Uzbekistan, President Islam Karimov has exercised uncontested rule since 1989.

Analysts said that as long as Bishkek acts as a stable and predictable partner, the Kremlin does not care how the country is run.

“Everyone soberly realizes that a Kyrgyz parliamentary republic is a very risky and ephemeral thing,” said Andrei Grozin, a Central Asian analyst with the Moscow-based Institute of CIS Countries.

“Kyrgyzstan’s neighbors as well as China, Russia and the United States are afraid that the parliamentary republic will completely finish off the Kyrgyz state.”

Alexei Malashenko, an analyst with the Carnegie Moscow Center, said that Medvedev was right in the sense that Kyrgyzstan might be too politically immature to introduce a parliamentary republic, but it did not have a choice.

“Authoritarian regimes did not prove their value, a presidential republic in Kyrgyzstan does not work,” he said. “What alternative is there – a dictatorship?”

Following the chaos of the recent weeks, some may want just that.

Miroslav Niyazov, a retired general popular with many ordinary Kyrgyz, said the battered country was in dire need of a “national leader,” perhaps unwittingly borrowing from the Russian strongman Vladimir Putin’s vocabulary.

Speaking in an interview with Russia’s Nezavisimaya Gazeta, he said that whoever wins a majority of the parliamentary elections due in September should be given a free hand.

“Let him build a vertical of power and bring about order in the country within the next six months,” he said.

Pakistan seeks to exploit US command vacuum

Pakistan seeks to exploit US command vacuum

* Ahmed Rashid says Islamabad is making efforts to influence impending US policy review on Afghanistan to put itself in the driving seat

ISLAMABAD: Pakistan is looking to exploit a shake-up in the US command in Afghanistan to bolster its allies within the Taliban and increase its influence over a future Kabul government, analysts say.

The strategy, however, relies on bringing the brutal and independent-minded Haqqani network to heel, something many believe is impossible.

The incoming US commander, General David Petraeus, “does not have a good relationship” with Chief of Army Staff Gen Ashfaq Parvez Kayani, said Ahmed Rashid, a political analyst, journalist and expert on the Taliban.

“The army does not trust him and they don’t like him,” Rashid said. “This hiatus is going to be used by both the Afghan government and the Pakistani government to see if they can get something going,” he added.

In essence, Pakistan is hoping the American command vacuum proves a window of opportunity for Islamabad to deal more directly with Kabul in forcing an accommodation with its militant allies, such as the Haqqani network.

This is currently opposed by the United States, but it would grant Pakistan a large measure of influence in Afghanistan.

After McChrystal’s replacement, Pakistan is hoping to establish a “reality on the ground” before Petraeus fully takes over, said Rashid.

“I think there will be a review of US policy very quickly as soon as Petraeus arrives and I think these efforts are being made to try and influence that review and put Pakistan in the driving seat,” he said.

And the Haqqani network and the Taliban is one of the main levers for Pakistan to exert influence.

“Pakistan is not just prepared but very eager to play a role in bringing peace in Afghanistan,” said Rahimullah Yousafzai, an expert on Taliban militancy.

Run by Jalaluddin Haqqani, an elderly veteran resistance leader against Soviet troops in the 1980s, the Haqqani network operates near Afghanistan’s border with Pakistan.

Leadership of the group has largely passed from the ailing Haqqani to his son, Sirajuddin, seen by US officials as more radical than his father. Yousafzai and Rashid both think it would be very difficult to convince the Haqqanis to lay down their arms.

“He (Sirajuddin) is very committed to international jihad. Part of his network includes al Qaeda, the Islamic Movement of Uzbekistan, other central Asian groups, Chechen groups. He’s been very protective of all these groups and they form his strength right now,” Rashid said.

“Secondly, they have never, never issued any kind of statement even remotely discussing the issue of reconciliation and peace in Afghanistan,” he said.

This weekend, a private TV channel Al Jazeera reported that Sirajuddin recently met with Afghan President Hamid Karzai, Gen Kayani and the head of Inter-Services Intelligence (ISI) Ahmad Pasha to discuss a peace deal.

But official sources in both Pakistan and Afghanistan, as well as Taliban spokespeople speaking for Haqqani, strenuously denied any such meeting.

“The Haqqani group isn’t a separate entity,” said Yousafzai. “Jalaluddin is a member of the supreme Taliban shura. I think it’s impossible that Jalaluddin Haqqani or his son will strike a separate deal with Kabul,” he said.

The US doubts that any deal can be made until the Haqqanis and other Taliban militants feel they are on the defensive in Afghanistan.

A senior intelligence official in Islamabad said that while Pakistan would like a “friendly” Afghanistan — which many analysts believe a Taliban-dominated government might provide — Pakistan would settle for peace. “We can deal with a hostile Afghanistan as long as it is peaceful,” he said.d.

Rashid scoffed at the idea of Pakistan wanting only a peaceful Afghanistan as “propaganda”.

“Our interest is not just having a peaceful Afghanistan. It’s more than that, certainly. Otherwise we wouldn’t be trying so hard,” he added. reuters

The coming conflagration

The coming conflagration

By Kamran Shafi
US Army Gen. David Petraeus, then the top commander in Iraq, center, walks with Iraqi Police Brig. Gen. Mohammed, far left, Iraqi Army Gen. Farhan, second left, a translator, third left, mayor Najim Abdullah Ahmed, second from right, and Maj. Mark Read, right, at a market in Muqdadiyah, Iraq. Petraeus faces daunting challenges when he assumes command in Afghanistan following what by all accounts will be quick approval by the Senate. – AP Photo
But first to Gen Stanley McChrystal who was always quite a favourite with me if only because he understood that if innocent lives were lost in the struggle against terrorism some form of apology, if not outright recompense, were immediately in order.

So, there he was, this rough and ready general, standing on the doorstep of those who had been affected, saying sorry. He was there too, his lean and businesslike look for all to see, leading his men from the front.

But, to say what he said must have taken some brass, some idiocy! “Biden who?” about the vice president; likening Holbrooke to a wounded animal and the president’s national security advisor Gen James Jones to a joker or some such; and describing certain events in barrack language which does not bear repeating in this family newspaper.

As someone has already said, McChrystal’s shooting off at the mouth could be a direct result of his being exposed rather a lot to Pakistani generals who say what they want when they want with complete and utter abandon. And, as we say in the vernacular ‘take their eyes out’ (aankhein nikaltay hain) at any ‘bloody civilian’ who dares question their pronouncements.

We must note here and now the shameful way in which, barring DawnNews, not one TV channel spoke about the message that President Obama’s firm and correct handling of McChrystal’s shooting off at the mouth should have immediately sent to the Pakistani civilian leadership and to Pakistani army generals: that this was the only correct and appropriate way of dealing with insubordination. Instead, all we saw were a few senior pundits tiptoeing around the issue as if they were ballerinas dancing on broken glass.

What makes this so much more important is the fact that the completely unmilitary and ill-disciplined way in which our prima donna brass hats, a most appropriate term used by President Truman for Gen Douglas MacArthur when MacArthur attempted to become emperor of all he surveyed and was sacked for his pains, behaved at the time of the announcement of the Kerry-Lugar Bill far surpassed anything McChrystal said or did.

In the KLB case, GHQ actually issued a press statement ‘furiously’ condemning an aid package agreed between the elected government of Pakistan and the US government! Which condemnation, let me repeat, did not prevent the ‘furious’ generals asking for US aid when, exactly nine days later, Gen Petraeus called on Gen Kayani. Just where the ‘fury’ vanished inside of nine days only our brass hats can tell us. If you ask me, a head or two should have rolled then and there, and the devil take the hindmost.

But back to the conflagration that threatens this country because of the mad march of the triumphalists: our prima donna brass hats who have convinced themselves that the Americans are impendingly leaving Afghanistan and it is once again Pakistan’s backyard to do with as it pleases. While the sheer foolishness of the premise that Afghanistan is putty to be moulded any which way the Pakistani security establishment wants to mold it astonishes one, what leaves one speechless is that nobody among the movers and shakers of our foreign policy seems to read anything anymore: or, in the immortal words of core FO (Foreign Office) professional after core FO professional, are ‘unaware’.

How is it, pray, that even the pointsman in this whole exercise of controlling Afghanistan, the dreaded Mother of All Agencies in whose fear tread all Pakistanis, does not know that the British prime minister David Cameron announced five days ago that he would like to see British troops home from Afghanistan by 2015. Hello! Is anyone listening? 2015 is four years after the 2011 pullback date given by President Obama may I remind you gentlemen.

This is not all. Gen Petraeus, in testimony before Congress — when will the day dawn when we see our Rommels and Guderians answer to our parliament? — two weeks ago said words to the effect that one had to be careful about deadlines and cut-off dates re: Afghanistan. Indeed Adm Mullen just said that America was not about to leave that country in a roiling mess: on the Tajik-Pakhtun divide: “It has the potential to tear this country apart. That is not what we are going to permit.” Is all of this not enough to convince our brass hats that (God be praised) the field is not theirs, yet?

Have they not seen the most recent reaction of the other ethnic nationalities of Afghanistan to the flurry of activity between the beleaguered President Karzai and his newfound friends in the Pakistani establishment? According to the NY Times: “Karzai has begun the ethnic war,” says Mohammad Mohaqeq, a Hazara leader and a former ally of Karzai’s, “the future is very dark.” Is it at all possible to think, even for a moment, that if Afghanistan is plunged into darkness that the sun will shine in Pakistan?

A reader has said that I get delirious when I point out the pitfalls of Pakistan boxing above its weight so to say, just as we are attempting to do in Afghanistan today. But, sir, have we not seen the fallout of our last betrothal with the Taliban? Have we not seen the kind of government they foisted on the poor Afghans when women (even doctors, nurses, midwives) were not allowed to work and women who needed medical care were not allowed to go to male practitioners? Were the women then supposed to lie down and die? Have we not seen the growth of their cousins in Pakistan and the attempted takeover of the Pakistani state too? And the extent of their brutality wherever they held/hold sway? ‘Delirious’ indeed.

Let us never think that the rest of the world will let us do what we will in that poor and unfortunate country. Let us instead put our own house in order. Let us listen to the plaintive cries of the Khyber Pakhtunkhwa government which is already warning that the Taliban terrorists are making a comeback in many of the areas from where they were said to have been expelled. Let’s get real, gents, and save our own country from the conflagration that is at hand. Empire-building another time.

kshafi1@yahoo.co.uk

Iran Starts Building First Gas Pipeline to Europe, Commits $1.55 Billion

Iran Starts Building First Gas Pipeline to Europe, Commits $1.55 Billion

By Ladane Nasseri

Iran started to build a long-planned pipeline to export natural gas to Europe with an investment of at least 1.3 billion euros ($1.55 billion), state television reported today.

Iran plans to complete its section of the pipeline by 2013, the TV network said, without citing a source. The system will pass through Turkey and have a capacity of as much as 110 million cubic meters of gas a day, it said. The route of the pipeline is unclear.

An earlier, unrealized version of this project was to extend to Greece, Italy, Switzerland, Austria and Germany, according to details disclosed in September 2008. It was not immediately clear if the government intends the new project as an alternative to the planned Nabucco pipeline, a 7.9 billion- euro network for transporting gas from the Caspian Sea through Turkey to Europe. Iran already operates a pipeline to Turkey, its western neighbor.

Iran, home to the world’s second-largest gas reserves after Russia, has for years been under United Nations sanctions and U.S.-imposed restrictions on foreign investment. The sanctions aim to deter Iran from pursuing a nuclear weapons capability. These economic and financial constraints have made it difficult for Iran to fulfill its energy plans and have hampered foreign investment in the country.

Iran insists that its nuclear program is for civilian purposes.

The Iranian section of the pipeline to Europe will stretch from the South Pars gas field to the Bazargan border post with Turkey, for a distance of about 1,850 kilometers (1,150 miles), state television said.

Of the 1.3 billion euros that Iran has allocated to its construction, about 825 million euros will come from the Oil Ministry and the rest from other sources, the Tehran-based Pool newspaper reported, without elaborating or disclosing the source of the information.

To contact the reporter on this story: Ladane Nasseri in Tehran at lnasseri@bloomberg.net.

Iran Sanctions–The Reason why Russia supported Iran Sanctions

[As usual, NewsCentralAsia comes through again, filling in the background details needed to understand Moscow's position in the Great Game.  If Iran cannot be hemmed-in, prevented from exporting gas to the neighborhood, then Putin's dream of Russia becoming Eurasia's primary source for energy will come to naught.]

Iran Sanctions: The Reason why Russia supported Iran Sanctions

nCa Report

Ashgabat, 29 June 2010 (nCa) — Gazprom, the largest natural gas company in the world and the mainstay of the Russian economy, is in deep crisis. By Gazprom’s own estimates, it will not be able to reach the pre-crisis level until 2013. It is a conditional assessment: To climb back to its former position, Gazprom needs to make sure that there is no alternate route for gas supplies to Europe.

This, in essence, is the reason why Russia supported the UN Security Council sanctions on Iran.

Shrinking Gazprom

In May 2008, Gazprom’s market capitalization exceeded US $ 350 billion. Its current market capitalization is US $ 140 billion, a dwarfish 40% of its former self. [1]

The oil sector of Russia is showing signs of coming out of the last year’s financial and economic crisis but the gas sector is still sluggish. By the end of 2009, the oil production and export of Russia increased marginally but the gas exports fell by 11% and Gazprom production decreased by 16% because of lack of gas demand. [2]

Although Gazprom claims to have practical plans to regain its former position by 2013, the abundant availability of cheaper shale gas in the US, the advancement in LNG liquefaction and transportation technologies and the prospects of accessibility of vast volumes of shale gas in Europe are all stacked against Gazprom ambitions.

The markets where Gazprom has near monopoly – the European markets – are not showing any signs of substantially increasing their imports from Russia.

On the other hand, the markets that are ready to consume more gas – China and Iran – are not connected with Russia by any pipeline system.

Even in the captive Russian market, Gazprom is being challenged by rising stars such as Rosneft and Novatek. Gazprom traditionally had 85% share of the domestic market but by the end of 2009 it had shrunk to 75%. [3]

Suicidal Gazprom

Faced with sharply declining export market, Gazprom did the thing only a Russian giant could do: It shot itself in the foot.

Gazprom stopped taking Turkmen gas in April 2009 without giving an adequate notice for shutting down of gas intake. As a result, the accumulated pressure in the pipeline system led to a string of accidents in Turkmenistan, causing severe damage to an expensive compressor station, a segment of the main trunk, and 20 gas wells.

This suicidal act of Gazprom prompted Turkmenistan to quickly build the second pipeline (Daulatabat-Khangiran) to Iran, increasing the export capacity to 25 bcm. Currently the combined export from both pipes (Korpeje-Kurtkui and Daulatabat-Khangiran) is around 9 bcm. It will reach 14 bcm in the coming winter, and to 20 bcm in foreseeable future.

At the time of the accident caused by Gazprom, Turkmenistan was already building a pipeline to China, which came into operation in December 2009. The present flow of gas from this pipe is 5 bcm. It will be raised to 13 bcm by the end of 2011 and then there would be sharp increase in the next two years.

The existing arrangements between Turkmenistan and China envisage eventual annual export of 40 bcm but the negotiations are underway to go even beyond that. The ultimate exports of Turkmen gas in the Chinese direction could be substantially more than 40 bcm. [4]

Increasing production

Gazprom plans to produce 519.3 bcm this year. The target for 2011 is 528.6 bcm, and for 2012 – 542.4 bcm. The idea is to reach the pre-crisis levels by 2013. [5]

However, Gazprom has lowered its gas export forecast for 2010 from 160.8 to 145 bcm, a decrease of nearly 10%. [6]

The exports this year would be just 4.35 bcm more than the 140.65 that Gazprom exported last year.

Decreasing prices

While there are efforts to increase production, there is nothing Gazprom can do to increase the export prices, or even hold them at the previous level.

The average forecast contract price has been lowered from US $ 326 to 308 per thousand cubic meters. [7]

Nord Stream and South Stream

Gazprom is relentlessly pushing for two hulks: Nord Stream and South Stream. Both of these projects are based on the assumption that Russia will always be able to remain the near-monopoly supplier of gas to Europe.

Gazprom expects that within the next decade the requirement of gas in Europe will increase by nearly 200 bcm or about 50%. [8]

The combined capacity of both strings of Nord Stream would be 55 bcm. [9]

The capacity of South Stream would be 63 bcm. [10]

Taken together, Nord Stream and South Stream will increase the gas export capacity of Russia in the European direction by 118 bcm.

In other words, Gazprom has the ambitions to meet about 60% of the additional demand of gas in Europe within the next ten years.

Encroachment in Ukraine

Gazprom chief Alexi Miller said during the annual meeting of the shareholders in Moscow on 27 June 2010 that a merger between Gazprom and Ukrainian utility Naftogaz is “historically predetermined.” He said that it would “increase efficiency for the Ukrainian gas industry and the industries that are large consumers of the gas.” Miller also said that “Naftogaz could gain access to gas fields holding as much as 35 trillion cubic feet of gas as an incentive for the merger.” [11]

With Yanukovich leading Ukraine and Boyko back to the oil and gas ministry of Ukraine, this could not be just empty talk.

Iran Pipe to Europe

While Russia is putting together an elaborate and meticulous plan to remain overseer of the gas market in Europe, Iran has started building its own pipeline in the European direction.

The Iranian pipeline will have capacity of 40 bcm, and expected cost is around US $ 1.5 billion. It is expected to be completed by 2013. It will start from South Pars field and terminate at Bazargon border point with Turkey, a distance of about 1850 km. The oil ministry of Iran will provide some 63% of funding for the project and the rest will come from other sources. [12]

Frightened Gazprom

Iran is already exporting some gas to Europe and that capacity would increase within the next three years. Moreover, Iran has two pipelines connecting to the gas network of Turkmenistan, and by default, Central Asia. This fact is especially significant if we consider that Iran produces enough gas to meet its domestic demands and any volumes it imports from Turkmenistan are exported to Turkey.

Because of flexible methods of negotiation, Iran can offer betters terms to European buyers of gas. In fact, the existing supply situation and the pipeline infrastructure are such that even today Iran can either supply or transit at least 15 bcm of gas to Europe.

The lucrative and politically pragmatic markets of central and Eastern Europe are in easy reach of Iran, and some buyers are already in talks with Iran.

If Iran starts exporting its own gas and transiting Central Asian gas to Europe, the entire gas reserve of Russia would be at risk of becoming ‘stranded gas.’

This possibility is not acceptable to Gazprom.

Gazprom’s fear of receding into irrelevance and Putin’s economic patriotism are the factors that compelled Russia to vote for the fresh sanctions against Iran.

References:

1. Gazprom in crisis: a chance for reform by Anders Åslund, European Energy Review, 26 April 2010 (http://www.europeanenergyreview.eu/index.php?id=740&id_referer=1898&id_artikel=1898)

2. Ibid

3. Ibid

4. Press briefing by the foreign office of Turkmenistan on 28 June 2010.

5. Dow Jones, 9 June 2010 (http://www.foxbusiness.com/story/markets/industries/energy/correctgazprom-plans-reach-pre-crisis-output-level/)

6. Xinhua, 23 June 2010 (http://english.people.com.cn/90001/90778/90858/90865/7036298.html)

7. Ibid

8. Gazprom website (http://www.gazprom.com/production/projects/pipelines/nord-stream/)

9. Ibid

10. Gazprom website (http://www.gazprom.com/production/projects/pipelines/south-stream/)

11. UPI, 28 June 2010 (http://www.upi.com/Science_News/Resource-Wars/2010/06/28/Naftogaz-Gazprom-link-destiny-Miller-says/UPI-47021277734221/)

12. Bloomberg, 7 June 2010 (http://www.bloomberg.com/news/2010-06-07/iran-starts-building-first-gas-pipeline-to-europe-commits-1-55-billion.html)

Baloch leader meets Joe Biden, draw attention to Balochistan’s situation

Washington, June 29 (ANI): President of Baloch Society of North America (BSO-NA), Dr. Wahid Baloch met US Vice-President Joe Biden to draw his attention to the ongoing military operation and enforced involuntary disappearances in Pakistani and Iranian occupied Balochistan.
“Secular Baloch are being hanged everyday by Iranian Mullah and killed and kidnapped by Pakistani Jihadi Islamic terrorist army and it’s ISI and no one is doing anything about it,” he told the Vice President.

“We support NATO forces in Afghanistan against the Taliban and Al-Qaida terrorists. Why we are not being helped by the State Department,” he asked Biden.

” We are secular and natural ally of U.S in the war on terror and we share many American values. We ask Obama administration to not support Pakistan but extend a helping hand to the Baloch people who are suffering in the hands of these two Islamic terrorist States, Pakistan and Iran”, he told the Vice President.

According to a UN report, over 80,000 Balochs have been evicted from their homes due to Pakistani bombardment since 2005 and are living in extreme harsh conditions.

Dr. Wahid said that the United States Government and internationalcommunity must not close their eyes over these crimes against the secular Baloch people and should hold the Pakistan army, its ISI and the Iranian terrorist revolutionary Guards accountable for these crimes. (ANI)

Russia seeks US explanation over ‘spy’ arrests

Russia seeks US explanation over ‘spy’ arrests

Moscow expects Washington to provide an explanation over the arrests of an alleged Russian spy ring in the US, Foreign Minister Sergei Lavrov says.

“They [the Americans] did not explain what the matter is about. I hope they will,” the Russian minister said.

Mr Lavrov’s comments come a day after 10 people were arrested in the US.

They are accused of conspiracy to act as unlawful agents of a foreign government, a crime which carries up to five years in prison.

They were allegedly part of an operation where agents posed as ordinary citizens, some living together as couples for years.

Nine of those arrested also face a charge of conspiracy to launder money, which carries a 20-year prison sentence.

An 11th suspect remains at large, according to the US justice department.

‘Contradictory’ information

Speaking to reporters in Jerusalem on Tuesday, Mr Lavrov said Moscow was awaiting an answer from Washington about the arrests.

So what were the alleged spies up to? The Department of Justice has made clear that none of the information at stake was classified. Most of what the alleged spies were after seems almost anodyne.

While the incident does not look good for the Russians, the initial US reaction has been sanguine.

Russian spy stories may be a throwback to the Cold War and sound alarming but they probably don’t surprise anyone in Washington, especially not in the government.

US officials who travel to Moscow routinely turn off their Blackberries and leave them on the plane to make sure data on their phones remains out of reach of any tech-savvy Russian intelligence agents.

“The moment when it was done has been chosen with a special finesse,” he said with apparent sarcasm, declining further comment.

A Russian foreign ministry spokesman said earlier that Moscow was “studying the information”.

“There are a lot of contradictions,” spokesman Igor Lyakin-Frolov told the AFP news agency.

Mr Lavrov’s comments suggest that he thinks it is an attempt by someone or some group within the US power structure to undermine newly warming relations between Moscow and Washington, the BBC’s Rupert Wingfield-Hayes in Moscow reports.

Our correspondent adds that one Russian academic speaking to the BBC said he believed the case would serve as a warning to US President Barack Obama not to trust Russia and not to get too close the Kremlin.

A senior government official told the BBC that it was unfortunate that such activity was taking place in the US, but that it should not affect the momentum established in the relationship with Russia.

Last week, Russian President Dmitry Medvedev was in Washington having lunch with President Obama.

‘Deep cover’

Alleged intercepted messages in court documents suggest the 10 people arrested in the US were asked to find information on topics including nuclear weapons, US arms control positions, Iran, White House rumours, CIA leadership turnover, and political parties.

The US Department of Justice says that eight of the suspects allegedly carried out “long-term, ‘deep-cover’ assignments” on US soil, working in civilian jobs so as not to arouse suspicion.

They were allegedly trained by the Russian Foreign Intelligence Service (SVR) to infiltrate policy-making circles and collect information, according to papers filed in the US court for the southern district of New York.

They were told to befriend US officials and send information using various methods to Russian government handlers.

US officials say the spy ring was discovered in a “multi-year investigation” by FBI agents who posed as Russian handlers and gleaned information from two of the suspects.

‘Invisible ink’

Investigators say some of the agents had been using false identities since the early 1990s, using codes and engaging in advanced computer operations, including posting apparently innocent pictures on the internet which contained hidden text.

The FBI also reported observing older techniques, such as messages sent by invisible ink, money being buried next to a beer-bottle marker and “brush pasts” in parks, where agents swap identical bags as they pass each other.

“You were sent to USA for long-term service trip,” says one purported message to two of the suspects that was intercepted by US intelligence.

“Your education, bank accounts, car, house etc – all these serve one goal: fulfil your main mission, ie to search and develop ties in policymaking circles in US and send intels.”

Generally, spies were allegedly tasked with becoming “Americanised” to be able to do this, with some pursuing university degrees, holding jobs, and joining relevant professional associations, court documents said.

The group allegedly got close to a scientist involved in designing bunker-busting bombs and a top former intelligence official.

There is a mass of detail on how the alleged network operated, but rather less on what sort of information the agents actually dealt with, the BBC’s Paul Adams in Washington says.

Court appearances

Five of the suspects briefly appeared in a Manhattan federal court on Monday, where a judge ordered them to remain in prison until a preliminary hearing set for 27 July.

Map of USA

These included a couple known as “Richard Murphy” and “Cynthia Murphy”, who were arrested in Montclair, New Jersey; Vicky Pelaez and a man known as “Juan Lazaro,” who were arrested in Yonkers, New York state; and Anna Chapman, who was arrested in Manhattan, New York City.

Another three – Mikhail Semenko and a couple known as “Michael Zottoli” and “Patricia Mills” – appeared in a federal court in Alexandria, Virginia, after being arrested in Arlington, Virginia.

The final two people – a couple known as “Donald Howard Heathfield” and “Tracey Lee Ann Foley” – were arrested in Boston, Massachusetts, and appeared in a federal court in the city.

A suspect known as “Christopher R Metsos” remains at large.

All the suspects except Ms Chapman and Mr Semenko have also been charged with conspiracy to commit money laundering.

Suspected Russian spies charged in US

[It is tempting to write all of this off as just another US/Russian psyop in support of the global pipeline drama, but I suspect that this may actually show the reality of US duplicity.  One day after putting on a show with multiple photo-ops dispensing the proper sound-bytes to the world audience, to highlight the new "reset" in relations, the FBI exposes a Russian spy operation that they have been watching for years?  This apparent sudden turnaround is a throwback to the Cold War era, where US and Soviet officials would shake hands one day, then level charges of spying and underhandedness the next day.  Such extreme diplomatic "flip-flops" were instruments for deceiving the American public about Russian intentions, more than they were actual slaps in the faces of Soviet leaders.

Either this latest spy incident is a prearranged drama, set-up by Obama and Medvedev for our amusement, or it is a Cold War type slap in the face by Obama and the Russo-phobes who are aligned with Brzezinski.  Coming on the heels of events in Eurasia which strengthen Russia's position (apparently at America's expense), and moves at the UN which appear to be a coming together of US and Russian diplomatic efforts, I am inclined to think that this backbiting exposure may be for real.

This could be Obama spitting in Putin's eye and then running for cover under the umbrella of "reset" relations.  If it is for real, then we can expect some sort of swift Russian retaliation in kind.  Manas will probably survive the row, but life there may become much harder after this.  This hypocritical schizoid-like American behavior, of shaking hands with foreign leaders one day, then stabbing them in the back the next, is incomprehensible to a normal mind.  Why do American leaders repeatedly take actions which seem to undermine their own agendas?]

Suspected Russian spies charged in US

US strategy expert Stephen Flanagan: ‘The suspects had been under surveillance by the FBI for some years’

Ten people have been arrested in the US and charged with spying for Russia.

They were allegedly part of an operation where agents posed as ordinary citizens, some living together as couples for years.

They are accused of conspiracy to act as unlawful agents of a foreign government, a crime which carries up to five years in prison.

A Russian foreign ministry spokesman said the information about the alleged spies was contradictory.

“We are studying the information. There are a lot of contradictions,” spokesman Igor Lyakin-Frolov told the AFP news agency, declining further comment.

Russian Foreign Minister Sergei Lavrov later said Moscow expected Washington to provide an explanation over the the spying row, Russia’s Interfax news agency reports.

Nine of the alleged spies also face a charge of conspiracy to launder money, which carries a 20-year prison sentence.

An 11th suspect remains at large, according to the US justice department.

Alleged intercepted messages in court documents suggest they were asked to find information on topics including nuclear weapons, US arms control positions, Iran, White House rumours, CIA leadership turnover, and political parties.

The US Department of Justice says eight of the suspects allegedly carried out “long-term, ‘deep-cover’ assignments” on US soil, working in civilian jobs so as not to arouse suspicion.

They were allegedly trained by the Russian Foreign Intelligence Service (SVR) to infiltrate policy-making circles and collect information, according to court papers filed in the US court for the southern district of New York.

They were told to befriend US officials and send information using various methods to Russian government handlers.

US officials said the spy-ring was discovered in a “multi-year investigation” by FBI agents who posed as Russian handlers and gleaned information from two of the suspects.

‘Invisible ink’

Investigators say some of the agents had been using false identities since the early 1990s, using codes and engaging in advanced computer operations, including posting apparently innocent pictures on the internet which contained hidden text.

Your education, bank accounts, car, house etc – all these serve one goal: fulfil your main mission, ie to search and develop ties in policymaking circles in US and send intels

District Court complaint

The FBI also reported observing older techniques, such as messages sent by invisible ink, money being buried next to a beer-bottle marker and “brush pasts” in parks, where agents swap identical bags as they pass each other.

“You were sent to USA for long-term service trip,” says one purported message to two of the suspects that was intercepted by US intelligence.

“Your education, bank accounts, car, house etc – all these serve one goal: fulfil your main mission, ie to search and develop ties in policymaking circles in US and send intels.”

Generally, spies were allegedly tasked with becoming “Americanised” to be able to do this, with some pursuing university degrees, holding jobs, and joining relevant professional associations, court documents said.

The group allegedly got close to a scientist involved in designing bunker-busting bombs and a top former intelligence official.

Court appearances

Five of the suspects briefly appeared in a Manhattan federal court on Monday, where a judge ordered them to remain in prison until a preliminary hearing set for 27 July.

Map of USA

These included a couple known as “Richard Murphy” and “Cynthia Murphy”, who were arrested in Montclair, New Jersey; Vicky Pelaez and a man known as “Juan Lazaro,” who were arrested in Yonkers, New York state; and Anna Chapman, who was arrested in Manhattan, New York City.

Another three – Mikhail Semenko and a couple known as “Michael Zottoli” and “Patricia Mills” – appeared in a federal court in Alexandria, Virginia, after being arrested in Arlington, Virginia.

The final two people – a couple known as “Donald Howard Heathfield” and “Tracey Lee Ann Foley” – were arrested in Boston, Massachusetts, and appeared in a federal court in the city.

A suspect known as “Christopher R Metsos” remains at large.

All the suspects except Ms Chapman and Mr Semenko have also been charged with conspiracy to commit money laundering.

Relations between Washington and Moscow have warmed in recent months.

Last week, Russian President Dmitry Medvedev was in Washington having lunch with President Barack Obama.

A senior government official told the BBC that it was unfortunate that such activity was taking place in the US, but that it should not affect the momentum established in the relationship with Russia.

‘Deep cover’

Kim Ghattas

Kim Ghattas,
BBC News, Washington

So what were the alleged spies up to? The Department of Justice has made clear that none of the information at stake was classified. Most of what the alleged spies were after seems almost anodyne.

While the incident does not look good for the Russians, the initial US reaction has been sanguine.

Russian spy stories may be a throwback to the Cold War and sound alarming but they probably don’t surprise anyone in Washington, especially not in the government.

US officials who travel to Moscow routinely turn off their BlackBerries and leave them on the plane to make sure data on their phones remains out of reach of any tech-savvy Russian intelligence agents.

Cold War meets ‘burger summit’

Which General Will Run In 2012?

McChrystal to retire from military: US Army

WASHINGTON: US General Stanley McChrystal plans to retire from the military after he was sacked last week as the commander of NATO-led forces in Afghanistan, an army spokesman said Monday.

“He told the army today he’s going to retire,” Colonel Thomas Collins told AFP.

McChrystal was forced to step down after he and his aides showed disdain for administration civilian officials in a Rolling Stone magazine profile.

The four-star general told the office that manages general officers that he would retire but has not yet submitted formal paperwork and it remained unclear how much more time he had in uniform, Collins added.

Obama has nominated General David Petraeus, credited with salvaging the US war in Iraq, to replace McChrystal at the Kabul headquarters.

Lawmakers predicted Petraeus will be easily confirmed by the US Senate, with hearings on his nomination due to start on Tuesday. – AFP/fa